If aggregate planned expenditure exceeds real GDP
A) firms are not maximizing their profits.
B) planned investment is greater than planned saving.
C) actual inventories decrease below their target.
D) planned consumption expenditure is less than actual consumption expenditure.

Question

Quizplus · Accepted Answer

When aggregate planned expenditure exceeds real GDP, it indicates that the demand for goods and services is higher than what was produced. This leads to a decrease in actual inventories below their target levels as firms sell more than they anticipated, drawing down their inventories to meet the higher demand.

If Aggregate Planned Expenditure Exceeds Real GDP